With effect from 6 April 1993 legislation was introduced to
align the NICs treatment with the tax treatment in respect of
travel and subsistence costs incurred by an employee as a result of
disruption to public transport caused by a strike or other
industrial action.
Until 6 4 2003, the tax position was covered by Extra
Statutory Concession (ESC) A58. This provided for any reasonable
amounts paid by an employer in respect of additional travel and
subsistence costs incurred by an employee as a result of industrial
action to be excluded from tax. Regulation 19(1)(o) of the Social
Security (Contributions) Regulations 1979 provided for similar
amounts to be excluded from Class 1 NICs from 6 April 1993.
The NICs exclusion was extended with effect from 6 April 2001 to
non-cash vouchers which satisfied the conditions for tax exemption
in ESC A58. This meant that from that date, there was no liability
for Class 1 NICs on any additional travelling and subsistence costs
incurred as a result of industrial action no matter how the travel
or accommodation was arranged.
If the employer maked the arrangements for the accommodation
or the travel directly with the hotel, etc. there was no liability
for Class 1 NICs because in meeting the cost the employer was
making a payment in kind. This was excluded from Class 1 NICs by
virtue of paragraph 1 of Part II of Schedule 3 to the Social
Security (Contributions) Regulations 2001 [formerly regulation
19(1)(d) of the Social Security (Contributions) Regulations
1979].
See SE10100 for guidance on the application of ESC A58
With effect from 6 April 2004 the Social Security
(Contributions) Regulations 2001 were amended in recognition of the
coming into force of the Income Tax (Earnings and Pensions Act)
2003 (ITEPA 2003).
Although ITEPA 2003 did not change the meaning of existing
tax law, the opportunity was taken, as part of the tax law rewrite
commitment, to provide legislative support for tax exceptions
previously provided under cover of extra statutory concessions.
Legislative cover for those items excepted from income tax by
virtue of ESC A58 (Travelling and subsistence allowances when
public transport disrupted) can now be found at section 245 ITEPA
2003 (Travelling and subsistence during public transport strikes)
and section 266(3) ITEPA 2003 (Exemption of non cash vouchers for
exempt benefits).
As a consequence the NICs legislation was amended with effect
from 6 April 2004 to reflect the new ITEPA 2003 provisions. The
NICs exceptions are now contained at paragraph 5B(a) of Part V and
paragraph 8 of Part X of Schedule 3 and disregard from
earnings:
The changes ensure full tax and NICs alignment on the treatment
of travel and subsistence payments (including vouchers) where
public transport is disrupted.
See EIM10100 for general guidance on section 245 ITEPA.
Although Class 1A NICs were extended to cover most benefits in kind from 6 April 2000, there is no liability for Class 1A NICs on any payment in kind which satisfies the conditions for tax exemption in section 245 ITEPA 2003. This is in keeping with the general exclusion from Class 1A NICs of any benefit which is not charged to tax as general earnings. . (See NIM13000 for guidance on the general principles regarding liability for Class 1A NICs.)
